1. Cooperative or Company
Who is this guide for?
„Organic business“
Smallholder
Producers
Cooperative or Company
Processors, Traders
Final consumers

2. Economic and non-economic benefits of organic & fairtrade
Simplified income model:
Net income = ( Harvest  Price ) – Production costs
Stabilized yields
Organic, fairtrade and quality premium
Reduction of input costs
+ less financial and production risk, less indebtedness
+ diversification of crops and income, more food security
+ environmental benefits (soil, water, bio-diversity)
+ health benefits (no pesticides, better food) 2

3. Level of sustainability
Sustainability triangle
Organic
Fair Trade
Other sustainability initiatives
Quality and social standards in conventional production
Level of sustainability
„Business as usual“

4. „You can‘t push a chain…“
 Start from the market!
Which products are in demand? (where? when? prices? trends?)
Potential products
What can we produce? (farming systems, technology)
Can we meet the requirements? (quality, volume, timing, packaging)
Which products are profitable? (production costs, margins)
Can we compete with others? (price, quality, added value)

5. Local vs. regional vs. global markets
Mainly fresh produce for urban centres; possibly with some organic premium
Mainly staple food (rotation crops), with little or no organic premium
Mainly export of commodities, with formal certification, organic and/or fairtrade premium
Regional urban markets
Local rural markets
Global markets
Logistics, quality requirements, premium, competition

6. Value chain chart Business environment
Provision
of inputs
Production
Bulking
Cleaning
Grading
Trade
Processing
Packaging
Retail
Services (financial, certification, advice etc.)

7. Organic cotton value chain map
Prod.
Rotation crops
Industrial textiles
Handmade textiles
Supporters
Consumers local / abroad
Consumers abroad
Consumers local / abroad
Cons.
Donors / Investors
Retailers
Retailers
Boutiques
Retail
Brands
Development NGOs
Traders
Textile processor
Traders
Government agencies
Cotton trader
Bulking / processing / trade
Certification agencies
Ginning Factory
Workshops
Financial service providers
Producer Coope- rative / Company
Research Institutes
Cotton farmers
Production
Input suppliers

8. Downstream integration
Present business scope
Downstream integration
Provision
of inputs
Production
Bulking
Cleaning
Grading
Processing
Packaging
Export
Retail

9. Analysis of the organic business Analysis of markets and trends
SWOT
Analysis of the organic business
Analysis of markets and trends
Strengths
Opportunities
Weaknesses
Threats
Analysis of competitors
Analysis of the business environment

10. Organisational structure of an organic business
Governing body
Executive director
Administration
Extension & ICS
Processing unit
Trade department
Accountant
HRD manager
Field officers
Internal inspectors
Processing staff
Quality manager
Logistics staff
Marketing staff
Lead farmers

11. Specialisation or diversification?
sufficient know-how of production methods, processing technology, markets
professional manage- ment of business relations
making use of econo- mies of scale
Diversification
reducing risks (production risk, price risk)
opening up new development oppor- tunities
making use of syner- gies (farming system, infrastructure, certifi- cates, management systems etc.)

12. Breaking even $ second break even point first break even point costs
profit
investment for up-scaling
or diversification
revenues
loss
years

13. Monthly liquidity

14. Producer organisation
Typical producer organisation set-up
Retailer 1
Retailer 2
Retailer 3
Processor / Trader
Trader
Organic business
Producer organisation
Management and Administration
Extension and ICS
Bulking
(Processing)
Marketing
Farmer Group 1
Farmer Group 2
Farmer Group 3
Farmers
Farmers
Farmers

15. Roles and functions of extension and ICS Internal Control System
Extension service
Internal Control System
Head of extension
Head of ICS
Training and supervision of field officers
Training and supervising of internal inspectors
Field officers
Internal inspectors
Note: Field officers of one zone can be internal inspectors in another zone
Training and supervision of lead farmers
Lead farmers
Inspection of farms
Training and technical advice of farmers
Farmers
Mutual exchange
Mutual control
extension
ICS
technical advice
internal control
collaboration

16. Fair trade pricing $ organic premium Fairtrade organic price
Fairtrade minimum price
market price
time

17. What is the Internal Control System (ICS)?
Consumers
External
Certifier
Retail
Trust
Processing
& Trade
Internal Control System
(ICS)
(adapted from IFOAM)

18. Actors, functions and tools in the ICS
Key tools
Decision on sanctions and exclusions
Sanction catalogue
Approval committee
Management of the ICS; checking its functioning
Operating manual, data base
Head of ICS
Internal inspectors
Internal inspection of farms
Internal inspection report
Lead farmers
Support farmers in documentation; report non-conformities
ICS forms
Documentation of farm activities;
mutual control
ICS forms
Farmers
field visits

19. Data handling and management
External certification agencies (organic & FT)
Management of the project
Distribution of inputs
Database
- lists (farmers etc.)
- data tables
- calculations
- reports
- forms
- checks
Commercial transactions
Purchase and payments
Training and extension
Farm documents
- farm data
- field data
Internal Inspection reports
Decisions of Approval Committee

20. Marketing mix
Product
Organic fairtrade cotton fibre for textile industry
Fairtrade certificate (FLO-Cert) and organic certificate (EU, NOP, certified by Ecocert)
Quality:
Staple length: mm
Micronnaire: 4.8
Producer: smallholders associated with producer organisation (certificate holder)
Country of origin: XXXXX
Packaging: in bales of 220 kg, wrapped in cotton tissue
Price
Producer price based on FLO minimum price for organic seed cotton
Fibre: premium price level
Price differentiation (discounts) based on volumes, readiness to enter into long-term partnership, and provision of pre-financing
Place (Distribution)
Direct export to spinning mills
or via cotton trader (exporter);
Small volumes sold to local handmade processing units
Promotion
Personal selling: getting in contact with potentially interested final distributors
Linking with potential clients through partner NGOs
Participation in organic and fairtrade fairs
Inviting potential clients to field visits
Promotional materials for clients and/or consumers
After-sales follow up on client satisfaction with spinning mills and distributors
Target Market
Fibre:
Top sustainability (Organic & Fairtrade), clients committed to poverty reduction in Africa
Final Product:
Retailers or wholesalers with Corporate Social Responsibility policy
Medium to high quality/price market segment

21. Pricing Economy Penetration Skimming Premium Quality Low High Low
Price
High
Skimming
Premium